Valuing Firms In A World Of Pandemic-Induced Bankruptcies

Law360, June 9, 2020

In their Law360 article, “Valuing Firms In A World Of Pandemic-Induced Bankruptcies,” Analysis Group Affiliate Edward Morrison (Columbia Law School), Managing Principal Andrea Okie, and Vice President Kerri Leonhardt examine critical valuation questions raised by the economic fallout from the novel coronavirus pandemic. They first identify three categories of firms that may file for Chapter 11 protection, classified based on their pre-pandemic financial condition: “shocked-but-sound,” “over-levered,” and “zombie” companies. They then discuss the implications of the pandemic on the building blocks for valuation: estimated free cash flows and the cost of capital.  Finally, the authors explore the special valuation challenges that companies in each category will need to consider as they navigate their own restructuring.

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Morrison E, Okie A, Leonhardt K